Economics at your fingertips  

Why do Indian Firms Borrow in Foreign Currency?

Ashis Pradhan () and Gourishankar Hiremath ()

Margin: The Journal of Applied Economic Research, 2020, vol. 14, issue 2, 191-211

Abstract: We investigate why firms in emerging economies such as India borrow in foreign currency. The results of a dynamic panel regression approach suggest that both firm-specific factors and macroeconomic factors are significant in explaining the corporate sector dollarization. Export revenue and tangible assets are primary drivers of the external commercial borrowings (ECBs) of non-financial firms, whereas the ECBs of financial firms are sensitive to interest rates in global markets. The policy measures to relax restrictions on firm borrowing in foreign currency facilitate the denomination of corporate debt in foreign currency, but such exposure was adversely affected by the global financial crisis. The findings of the study suggest the vital need to develop the domestic bond market to reduce firms’ dependency on external finance. The results also call for competitive interest rates in the domestic fixed income segment through monetary policy intervention. JEL Classification: G300, G320, F310

Keywords: Foreign Currency Borrowings; Dollar Debt; Non-financial Firms; Interest Rate; Exchange Rate Depreciation (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1177/0973801020904492

Access Statistics for this article

More articles in Margin: The Journal of Applied Economic Research from National Council of Applied Economic Research
Bibliographic data for series maintained by SAGE Publications ().

Page updated 2022-01-06
Handle: RePEc:sae:mareco:v:14:y:2020:i:2:p:191-211